If you work for a small business and a 401(k) has been out of reach, that may soon change. A new rule established by the Labor Department will make it easier for employees at small businesses to take advantage of multiple-employer plans. Starting on September 30, businesses from various industries will be able to team up with other businesses within the same geographical area.
Known as “association retirement plans,” the 401(k) plans would be offered through various employer groups such as a local chamber of commerce. Human resource firms that provide services for various businesses may also offer the plans, as long as they are shared among employees within the same industry.
According to NBC News, this is great news for the nearly 38 million employees who currently don’t have a retirement plan through their employer. Employees without access to a 401(k) tend to work at a business that employs fewer than 100 people.
In 2019 the maximum contribution to a 401(k) is capped at $19,000 for workers under 50 and $25,000 for older contributors. Workers who have spent years at a small business without a contribution can use the “catch up” period at 50+ years old to prepare for their potential approaching retirement.
While the new 401(k) plan may provide additional retirement options that were not previously available for millions of Americans, it will still be up to various organizations to prepare for those plans and American workers will still need to have the means to contribute.